All things considered we’re much more unequal than we think we are

Charles Murray is that rare thing – an outspokenly libertarian social scientist. As such he is a figure of considerable controversy.

Noah Smith is a moderately liberal economist and not a natural ally of Murray’s. Nevertheless on his Noahpinion blog, Smith describes Murray as “one of America’s most important thinkers” whose most recent book has “changed my mind in big, deep, fundamental ways”:

“…Coming Apart is all about the social problems of the American lower middle class. They have broken families and poor health, and are disengaged from their communities. If you read the book, you will be convinced by the numbers that these things are really happening. The same problems are not happening to the upper middle class.”

Translating class terms from American into British English is always tricky, but in this context “lower middle class” broadly refers to those in the genuine middle of the income spectrum. “Upper middle class” refers to professional and managerial groups further up the scale (though not right at the top).

The boundary between the two groups represents a new fissure in American (and British) society. Below the divide, economic opportunities are stagnating if not contracting. Above the divide, highly-skilled employees in knowledge-intensive sectors are still prospering (with the richest one per cent doing best-of-all, of course).

For reasons set out in the ConservativeHomemanifesto, we should be deeply concerned by this state of affairs. Inequality doesn’t have to be a problem if a growing, entrepreneurial economy is making us all richer and happier, but if ordinary working people no longer have a share in the benefits of economic growth then that is a very big problem indeed.

The key point that Noah Smith makes is that the inequality problem is even worse than the financial numbers would suggest:

“Before I read Coming Apart, I was relatively unconcerned with the situation of the American lower middle class. I knew that their incomes had slightly declined, and that their economic risk had increased. But compared to people in poor countries, they seemed very well-off… So I pretty much disregarded their problems…”

In British terms, the upper middles may get to shop at Waitrose while the lower middles make do with Tesco, but by any sensible standard this is a trivial distinction. As long as you’re not struggling with basic purchases, having more money can only buy you a bit more happiness.

However, when things like like “family stability, imperfectly treatable health problems, and community engagement” are taken into account, the class divide becomes a chasm:

“In other words, a big quality-of-life difference has opened up between the lower- and upper-middle-class. Economics typically disregards quality-of-life issues… But more and more, I’ve come to believe that human utility (and happiness) is dominated by things for which no market exists.”

It’s good to see the significance of family breakdown and related issues being recognised by liberals and libertarians as well as by conservatives. However, it’s important that we don’t draw too hard a distinction between what Smith calls “the quality-of-life issues” and the quantifiably financial issues. The chance to own your own home, to get a good job and put money aside for the future are matters of personal dignity not just personal finance.

We need to understand the problem of inequality in all of its aspects – and the more we do so, the worse it looks.